Student maintenance grants scrapped

University student grants are to be scrapped from September 2016 and replaced with loans as part of controversial changes to education funding set out by George Osborne in his budget.

Maintenance grants, which are means-tested, cover a students' rent and living costs at university and are intended to help those from poorer backgrounds.

But they already cost £1.6billion a year of the business department's £13billion budget. Officials are concerned that the grant budget could double over the course of the Parliament.

Mr Osborne said: "From 2016/17 academic year, we will replace maintenance grants with loans for new students, loans that only have to be paid back once they earn over £21,000 a year.

"And to ensure universities are affordable to all students from all backgrounds we will increase the maintenance loan available to £8,200, the highest amount of support ever provided.

"To ensure our university system is sustainable, we will consult on freezing the loan repayment threshold for five years and will link the student fee cap to inflation for those institutions that can show they offer high-quality teaching.

"It is a major set of reforms to make sure Britain continues to have the best universities in the world. It is fair to students, fair to taxpayers and vital to secure our long-term economic future."

Mr Osborne also said tuition fees could rise with inflation, above £9,000, for those institutions which offer high-quality teaching from 2017-18. But critics said many low and middle income students could be put off university by these measures.

Currently, students from families with annual incomes of £25,000 or less get the full grant of £3,387 a year. For families with incomes of £30,000, the grant fell to £2,441, while at £35,000 it was £1,494. Students from families with a household income of £40,000 received £547, and if the income was above £46,620 no amount was awarded. Unlike loans, the grants were not required to be repaid.

More than half a million students in England receive a maintenance grant from the taxpayer, worth in total £1.57bn a year. Mr Osborne said the cost of this was set to double to £3bn in the next decade as the cap on student numbers was lifted.

Changes to the welfare system mean under-21s will be expected to stay in education or get a job under new 'earn or learn' rules.

Mr Osborne said: "It is not acceptable that some young people leave school straight into a life on benefits.

"Young people in the benefits system should face the same choices as other young people who do work but cannot afford to leave home."

The plans for student grants will go down badly with student groups, who say that with fees having tripled to £9,000 a year, the prospect of getting into further debt will put off students from low-income families.